Many corporations are failing to obtain full value from their boards. This lost opportunity occurs not only in dysfunctional organizations but also in companies that perform well and are market leaders. While many boards unfortunately have weak or even incompetent members, even companies with highly qualified directors often can fail to fully tap the skills and experiences of those individuals. It doesn’t have to be this way. Based on a recent comprehensive study of board reviews and our collective experience of more than 60 years of assessing senior managers and board members, we believe that a set of sound practices for creating and running an effective board can help companies avoid such waste at the top.
Over the past five years, we have performed almost 100 board reviews (see “About the Research”). The businesses involved were based on all continents and in all major industry sectors and covered a wide range of organizations, from large to small, both publicly listed as well as government and family owned. Based on the data collected (see “What Boards Know That Companies Don’t.”), we are convinced that most boards have five key problems.
About the Research »
About the Research
There have been no comprehensive reports thus far on what companies learn during a board review. That’s mainly because the practice is relatively new and typically is conducted in-house. Recently, though, an increasing number of organizations have begun to seek outside assistance from firms such as ours. In fact, over the past five years we have conducted almost 100 third-party board reviews involving about 1,000 directors. The organizations involved cover a wide range of businesses, from large to small, both publicly listed as well as government and family owned, and based in every major industry sector. The companies are located on all continents, with the following countries highly represented: the United States, Canada, the United Kingdom, Germany, Belgium, Denmark, France, Italy, Switzerland, Australia and Singapore. When conducting a review, we deployed a comprehensive questionnaire that was typically followed up with extensive personal interviews of the individual directors. In aggregate, the data provide rich information about the various aspects of board performance, dynamics and behavior. (See “What Boards Know That Companies Don’t.”)
About the Authors
The authors are partners of Egon Zehnder International, a global executive search firm.Chris Thomas has been responsible for developing the board consulting practice at Egon Zehnder;David Kidd is currently the leader of that practice; andClaudio Fernán-dez-Aráoz is a member of the firm”s executive committee and the author of Great People Decisions, to be published by Wiley in the summer of 2007. They can be reached at Chris.Thomas@ezi.net, David.Kidd@ezi.net and Claudio.Fernandez.Araoz@ezi.net.